TLDR (too long didn’t read): What you need to know
The UK government is introducing new late payment rules 2025 to help small businesses get paid faster. From stricter payment terms to tougher enforcement, these changes could transform how SMEs manage cashflow, if they’re properly enforced. Here’s what’s changing and how Harland Accountants can help you prepare.
Late payments are one of the biggest challenges small businesses face. Whether caused by bureaucracy or poor internal systems, they disrupt cashflow, increase stress, and limit growth. Now, the UK government’s Plan for Small and Medium Sized Businesses aims to change that. Described as the biggest late payment reform in 25 years, it’s designed to stop large companies using smaller suppliers as their cashflow buffer, and to make prompt payment a legal expectation, not a courtesy.
Here’s everything you need to know about the new late payment rules 2025 and how to get your business ready.
1. Payment terms will be capped
Under the new late payment rules 2025, maximum payment terms will be limited to 60 days, falling to 45 days after five years. Businesses that pay late will automatically owe statutory interest on overdue invoices.
For small businesses, this should mean more predictable income and better financial planning. You’ll have fewer surprises, more reliable cashflow, and more time to focus on growth instead of chasing payments.
However, some experts argue that 60 days is still too long. If your business currently operates on shorter terms, this is a good time to review and tighten your own payment policies.
2. Large companies will face more oversight
Big businesses will soon be legally required to establish audit committees to monitor their payment practices and publish results in annual reports. The idea is to hold boards accountable for how they treat suppliers and encourage a fairer payment culture across UK business.
But advisers have warned, this will only make a difference if the results are publicly shared and meaningfully measured, not just filed away as compliance paperwork.
3. The Small Business Commissioner is getting stronger powers
From October 2025, the Office of the Small Business Commissioner (OSBC) will gain new authority to:
- Carry out spot checks on late-paying corporations
- Issue fines to repeat offenders
- Enforce a 30-day invoice verification period to speed up dispute resolution
- Exclude late-paying firms from major public sector contracts
This means more accountability at the top and more protection for small businesses that rely on timely payments to survive.
4. How accountants can help you prepare
Your accountant can play a key role in helping you adapt to the new late payment rules 2025. Here’s how:
Sharpen your cashflow forecasts: Reliable forecasting helps you anticipate payments, plan investment decisions, and stay financially resilient. With shorter payment terms, your forecasts can become far more accurate.
Put late payers on notice: Update your terms and conditions, identify clients who routinely pay late, and make sure you apply statutory interest where appropriate. A proactive approach can make a real difference.
Digitise your invoicing process: Automated invoicing software can send reminders, flag overdue payments, and help you get paid faster. At Harland, we can help you integrate digital systems that save time and smooth your cashflow.
Review your contracts: Make sure your supplier and customer contracts reflect the new legislation. This includes adjusting credit terms and adding late payment clauses where needed, ideally in collaboration with your accountant and legal adviser.
Our take
The new late payment rules 2025 could mark a turning point for small business cashflow. But as ever, the difference will come down to enforcement. At Harland, we help SMEs across Cornwall and beyond build stronger, fairer financial foundations — so you can plan confidently, grow sustainably, and get paid what you’re owed.
If you’d like help reviewing your terms, improving cashflow forecasting, or implementing digital invoicing systems, we’d love to support you.
FAQs: UK late payment rules 2025
The new rules are due to start from October 2025, with payment term caps phased in over the next five years.
Payment terms will be capped at 60 days, falling to 45 days after five years.
Yes. Businesses that pay invoices late will automatically owe statutory interest, making delays more costly.
The rules primarily target large corporations that delay payments to smaller suppliers. SMEs stand to benefit the most.
Update your contracts, digitise your invoicing, and work with your accountant to strengthen cashflow management and credit control.
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